Law Times

www.lawtimesnews.com LAW TIMES 14 COVERING ONTARIO'S LEGAL SCENE | JANUARY 21, 2019 sessments did not provide basis for taxpayer's failure to make payments or forward requested information to CRA. Taxpayer did not establish that there was undue delay by Crown or CRA. Precedent holding that taxpayer who knowingly failed to pay tax debt pending determination of related case could not normally obtain relief from paying inter- est applied, as quantum alone did not remove this from nor- mal situation where taxpayer had options available to reduce interest exposure. In light of Minister's discretion under s. 220(3.1) of Act and delegate's consideration of multiple fac- tors, there was no error in find- ing decision reasonable. Walsh v. Canada (Attorney General) (2018), 2018 Carswell- Nat 8359, 2018 FCA 229, Gauth- ier J.A., Stratas J.A., and David G. Near J.A. (F.C.A.); affirmed (2017), 2017 CarswellNat 1809, 2017 CarswellNat 6790, 2017 FC 411, 2017 CF 411, James Russell J. (F.C.). Tax Court of Canada Tax INCOME TAX adminiStration and enforCement Fact that taxpayer's appeals involved lots of money did not make them significant to public Taxpayer bank brought motion for leave to call seven expert witnesses at trial of its appeals from assessments. Motion dis- missed. Factors under s. 145(5) of Federal Court Rules (Gen- eral Procedure) imposed high threshold on party seeking to call additional expert witness- es. Fact that taxpayer's appeals involved lots of money did not make them significant to pub- lic. Issues surrounding applica- tion of transfer pricing rules to settlement payments and rel- evance of accounting treatment to deductibility of expenditures within corporate group were not of broad application and need to resolve them was not particularly pressing. Expert evidence would be important in complex and technical ar- eas of accounting and transfer pricing issues, but that alone could not support presumption that more than five expert wit- nesses would be needed. Tax- payer's proposed seven experts included four transfer pricing experts, where norm with trans- fer pricing cases was to call one or two such experts and there was nothing to indicate that taxpayer's appeals differed so significantly from norm as to require so many more experts. Proportionality factor strongly favoured taxpayer as expense of calling proposed witnesses paled in relation to amounts of about $3,000,000,000 at issue. Concerns about duplication of expert witness testimony could be considered under s. 145(5) of Rules, as barring such consid- erations would defeat purpose of s. 145(4) of Rules to limit number of experts that could be called, and taxpayer did not establish that experts' evidence would not be duplicative. While more experts might be needed because traditional transaction- based transfer pricing meth- ods could not be applied given unusual subject of transfer pricing inquiry, disparity with Minister's one transfer pricing expert suggested that taxpayer was attempting to win through numbers. Taxpayer's delay in bringing motion would not be considered due to Minister's failure to argue for such consid- eration, but it would otherwise have been given very significant weight. Only factor that sup- ported taxpayer's motion was that additional costs associated with extra witnesses paled in re- lation to amount in dispute, and mere fact that there was lot of money at stake was insufficient to allow motion. Canadian Imperial Bank of Commerce v. The Queen (2018), 2018 CarswellNat 7853, 2018 TCC 248, David E. Graham J. (T.C.C. [General Procedure]). Taxpayers committed abuse of process in bringing motion without any merit Court order required Minister of National Revenue to reply to taxpayers' letter requesting pre- discovery document disclosure by specific date. Minister replied by offering to provide over 16,000 documents, subject to conditions. Taxpayers brought motions for order pursuant to R. 126(4)(b) of Tax Court of Canada Rules (Gen- eral Procedure) for judgment on basis that Minister did not reply to taxpayers' request for docu- ments by date specified in court order, and for order pursuant to R. 16.1 of Rules to treat affidavits filed in support of first motion as confidential documents. Motions dismissed. Private information in affidavits were not relevant to determining issue of whether Minister failed to comply with issue. Court order only required Minister to reply to taxpayers' request for documents, and did not require Minister to disclose any document. Order was in- tended to move matter along so taxpayers could bring motion for document disclosure beyond list of documents that had been ex- changed. Fact that taxpayers were not satisfied with reply did not mean that Minister did not com- ply with order. Taxpayers mis- characterized nature and effect of order. Minister had been very accommodating to taxpayers and had acted quickly to deal with is- sues. Taxpayers claimed Minis- ter's action amounted to abuse of process but it was taxpayers who committed abuse of process in bringing this motion without any merit and filing 15 affidavits that had nothing to do with issue. Simard v. The Queen (2018), 2018 CarswellNat 7805, 2018 TCC 237, F.J. Pizzitelli J. (T.C.C. [General Procedure]). Taxpayer was acting with wilful blindness in making false statements Taxpayer claimed $310,555 and $204,138 as "other deductions" in his 2012 and 2013 income tax returns. Minister of National Revenue assessed these two taxa- tion years, denying claimed de- ductions and imposing penalty pursuant to s. 163(2) of Income Tax Act. Taxpayer appealed. Ap- peal dismissed. Taxpayer had problems with prior returns for 2008 to 2011 taxation years and was aware when he claimed large deductions that these prior re- turns had not been accepted as filed, that they were under appeal and that business losses had been denied and penalties imposed for those years. Taxpayer was clearly capable of understanding poten- tial consequences of choosing to continue to claim false deduc- tions in his returns, which never existed. It constituted reckless behaviour on his part, particu- larly in light of prior problems, and this alone was sufficient for conclusion that Minister was cor- rect in imposing gross negligence penalties. Taxpayer was acting with wilful blindness in making false statements. To refuse to offer anything concrete in way of evi- dence spoke volumes in that tax- payer knew full well what result of his conduct would be. There was no doubt that he refused also to obtain other professional advice because he knew full well that he would be advised not to continue to make these foolish claims for non-existent deductions. Bradshaw v. The Queen (2018), 2018 CarswellNat 7707, 2018 TCC 246, Diane Campbell J. (T.C.C. [General Procedure]). Ontario Civil Cases Business Associations SPECIFIC MATTERS OF CORPORATE ORGANIZATION ShareholderS Conduct not sufficient to justify costs order Applicant company (B Ltd.) was engaged in development and implementation of crypto- graphic technologies and block- chain based solutions. B Ltd. was formed by reverse takeover implemented by respondent in- dividual B, and company MCI. Disputes arose over agreements for investments and share trans- fers. B Ltd. and individual share- holders A and W's (collectively B Ltd.) application for oppression remedies was granted in part. B, in his capacity as CEO of B Ltd., had breached his fiduciary duties and caused affairs to be conducted in oppressive manner that unfairly disregarded and was unfairly prejudicial to B Ltd. and its shareholders. B and MCI were ordered to repay $561,373 that had been misappropriated from B Ltd. and to pay B Ltd.'s costs of $225,956.87 on partial indemnity basis. In event that repayment of misappropriated funds was not repaid, it was ordered that B Ltd. could cancel shares held by MCI of equivalent value. As funds were not repaid, B Ltd. applied to vary relief claimed to require buyout of MCI's investment shares in B Ltd. at fair market value or alter- natively, to vary value of cancelled share to $.05 per share as opposed to $.09' per share; B Ltd. also ap- plied for cancellation of MCI's shares akin to misappropriated funds based on difficulty collect- ing costs. Application granted in part. As judgment had not yet been issued and entered, court had jurisdiction to vary its terms. However, amendment to reasons as requested by B Ltd. for buyout was refused and remedies were appropriate to address oppressive conduct found. B Ltd.'s request to seek order to buyout balance of MCI's shares, given valuation of $.05 per share was equivalent to their initial request for cancella- tion of shares. While oppression remedy offered f lexible remedy, B Ltd.'s request for additional re- lief was not one which should be granted to avoid new proceeding where evidence would be same. Issues were res judicata to parties involved. Reasons were amended to ref lect cancellation of B Ltd. shares held by MCI to redress misappropriation from B Ltd. of $561,313 at fair market value at $.05 per share as opposed to $.09. B Ltd. to advise of number of ex- act shares for cancellation at $.05 per share valuation. Order as to costs refused at MCI's conduct was not sufficient to justify such order; B Ltd. understood risks involved in commencing applica- tion against foreign respondents. However, MCO would not be entitled to vote any of its B Ltd. shares at shareholders meeting until it paid B Ltd.'s costs. Arend v. Boehm (2018), 2018 CarswellOnt 10590, 2018 ONSC 4084, L.A. Pattillo J. (Ont. S.C.J.); additional reasons (2017), 2017 CarswellOnt 17756, 2017 ONSC 3582, L.A. Pattillo J. (Ont. S.C.J.). Civil Practice and Procedure COSTS effeCt of SuCCeSS of proCeedingS No reason to infer respondent had to decline other remunerative activity in order to work on case Applicant was plaintiff in civil ac- tion against trade union and six officers and respondent law firm acted as counsel for applicant in action. Action was administra- tively dismissed and applicant changed counsel. Motion to set aside dismissal of action was unsuccessful. Costs order was made against applicant in favour of defendants and applicant paid costs in amount of $31,958.91. Applicant brought unsuccessful application for order that costs be reimbursed by respondent. Parties made submissions on costs. No costs order was made in favour of respondent except as to disbursements in amount of $1,381.91. There was absence of evidence about actual oppor- tunity cost incurred and no rea- son to infer that respondent had to decline other remunerative activity in order to work on case. Respondent had opportunity to provide evidence in filing reply costs submissions, particularly when issue was squarely raised by applicant, but did not. Mitchinson v. Marshall (2018), 2018 CarswellOnt 20818, 2018 ONSC 7419, R.B. Reid J. (Ont. S.C.J.); additional reasons (2018), 2018 CarswellOnt 15797, 2018 ONSC 5632, R.B. Reid J. (Ont. S.C.J.). Construction Law CONTRACTS payment of ContraCtorS and SubContraCtorS Motions Judge erred in substituting his own view of merits of case for that of Master In construction lien action plain- tiff contractor sued for payment of work he did in designing and overseeing renovation of defen- dant owner's home. Contractor sought $106,510.19 comprised of unpaid costs, unpaid manage- ment fee and HST, while owner counterclaimed for $14,568.31 for construction deficiencies. Master delivered report granting con- tractor judgment after finding that parties agreed to cost-plus contract in which contractor had proven he was entitled to be paid his costs, but failed to prove man- agement fee was term of contract, and contractor was awarded $32,006 for unpaid construction costs less $450 for deficiencies. Contractor successfully brought motion to set aside report. Owner appealed. Appeal allowed. Deci- sion of Motions Judge was set aside, and Report of Master was confirmed. Motions Judge treat- ed motion as de novo hearing, in which he substituted his own view of merits of case for that of Master. He found that there was no contract, assessed the case on quantum meruit basis, re- weighed evidence, and awarded amount which he thought con- tractor should receive. This con- stituted error of law. Demir v. Kilic (2018), 2018 CarswellOnt 20717, 2018 ONSC 7279, C. Horkins J., Conway J., and Labrosse J. (Ont. Div. Ct.); reversed (2018), 2018 Carswel- lOnt 1891, 2018 ONSC 949, Per- ell J. (Ont. S.C.J.). Environmental Law STATUTORY PROTECTION OF ENVIRONMENT environmental offenCeS Basic evidence was sufficient for Crown to have proceeded with charge Plaintiff, who had history of non- compliance with Environmental Protection Act, was charged with further offence under Act. CASE LAW

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